Finance Minister introduced GST reform plan, lower rates and emphasis on making compliance easier
Finance Minister Nirmala Sitharaman on Wednesday proposed extensive reforms in the GST system in front of GOMS, a group of ministers of the states. This proposal mainly emphasizes to simplify tax rates and reduce the compliance burden of traders. According to PTI news, the proposal stated that the central government is planning to bring GST rates to the current 5%, 12%, 18% and 28% categories to two categories of 5% and 18%. At the same time, SIN Goods (which are considered harmful to society) are also suggested to apply a special rate of 40%.
Discussion on these subjects
According to the news, the Finance Minister in his address of about 20 minutes put the need of these reforms and the benefits of it in front of the representatives of the states. The meeting will run for two days, in which subjects like rate rationalization, tax on insurance and compensation cess are being discussed. GOM associated with insurance sector is considering reducing GST rates on health and life insurance premiums. At the same time, compensation cess group will suggest about its future, especially at a time when the deadline for repaying the loan is ending.
Responsibility to suggest solutions to problems
Rate rationalization GOM has been given the responsibility of suggesting a solution to the tax slab amendment, rates of rates and duties inauguration. The group will hold a meeting again on 21 August. According to an SBI Research report, if these proposals are applicable, the government may have a revenue deficit of about ₹ 85,000 crore annually. If the new rates are effective from October 1, then there may be a loss of about ₹ 45,000 crore in the current financial year.
The next meeting is potential next month
These proposals will be placed before the GST Council after approval of GOMS, whose next meeting is likely next month. Prime Minister Narendra Modi has already indicated that GST reforms will be implemented by Diwali. The report also mentions that the average effective tax rate at the time of GST was reduced to 14.4%, which had come down to 11.6% by September 2019. This rate can come up to 9.5% with the implementation of new rates.
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